[In-Depth Review] The Hidden Side of UN Sanctions on North Korea's Underground Resources

Choi Kyung-soo, Director of the North Korea Resources Research Institute

As the global economy recovers, prices of major underground resources such as iron ore are soaring. However, despite this favorable economic situation, North Korea's underground resources remain dormant beneath the ground. It has already been four years since the United Nations (UN) sanctions against North Korea began in 2017.

The core of the UN sanctions is the ban on North Korea's underground resource exports, but they also prohibit new investments by foreign companies and scientific and technological cooperation. North Korea has become isolated and helpless. As long as the UN sanctions are not lifted, North Korea cannot engage in any activities with foreign companies.

North Korea has earned enormous foreign currency through underground resource exports. From 1998, when UN sanctions began, until 2017, a period of 20 years, North Korea's underground resource exports to China totaled $12.3 billion. Among these, coal accounted for $8.7 billion and iron ore $2 billion, with these two minerals making up 87% of the total underground resource export value. Therefore, coal and iron ore were the first to be targeted by sanctions. Subsequently, the list of sanctioned minerals expanded to include 10 items such as gold, vanadium, rare earth elements, and magnesite.

The UN sanctions led by the United States aimed to prevent foreign currency earned from exports from being diverted to nuclear and missile development, but it also seems to contain a strategy to loosen China's influence over North Korea.

Rare earth elements, key minerals for the 4th industrial revolution, had already stopped being exported in 2016 before the UN sanctions, and their export value was only $1.925 million over three years (2013?2015), yet they were included in the sanctions list. Even vanadium, which had no export record, was added to the sanctions list. Since the main purpose of the UN sanctions was to block foreign currency inflows to North Korea, it seems unnecessary to sanction underground resources with no or very little export. Could there be another ulterior motive of the United States here?

China conducts the most business with North Korea. Its mining investments and trade transactions have been more extensive than those of any other country. China has also succeeded in securing development rights for major North Korean mines. Chinese companies have participated in projects involving gold, magnesite, tungsten, and rare earth elements, which have attracted U.S. interest. However, since the 2017 UN sanctions, Chinese companies can no longer invest in North Korean mines or import underground resources.

The mining boom in North Korea, which was enjoyed with the help of Chinese companies, has also come to a halt. While the North Korean government suffers the greatest damage from the UN sanctions, Chinese companies have also been significantly affected. Many Chinese companies that traded underground resources with North Korea are now in a state of suspended operation.

If the UN sanctions had not been in place, China's advance into North Korea's underground resources could have reached a truly worrisome level. From the perspective of the United States, which is interested in North Korea's underground resources, China's monopoly would not be desirable for U.S. interests. Therefore, the U.S. strategy might be to block this by UN sanctions if it cannot participate directly.

What choice will the United States make after the UN sanctions? The U.S. is engaged in a trade war with China. Rare earth elements are at the center of the U.S.-China trade war. Although still a developing issue, North Korea also has abundant rare earth deposits. U.S. President Joe Biden is making significant efforts to secure rare earth elements. The UN sanctions against North Korea may be a signal from the U.S. to correct the ‘tilted playing field’ that has become one-sidedly favorable to China in the North Korean underground resource market. The next move by the United States is eagerly anticipated.

This content was produced with the assistance of AI translation services.